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Analysis of the usability of capital buffers during the crisis precipitated by COVID-19

Author

Listed:
  • Luis Fernández Lafuerza

    (BANCO DE ESPAÑA)

  • Matías Lamas

    (BANCO DE ESPAÑA)

  • Javier Mencía

    (BANCO DE ESPAÑA)

  • Irene Pablos

    (BANCO DE ESPAÑA)

  • Raquel Vegas

    (BANCO DE ESPAÑA)

Abstract

This paper analyses the ability of banks to use voluntary and regulatory capital buffers, taking advantage of the experience of the COVID-19 pandemic. In the first place, we find that the usability of macroprudential buffers is not hampered in Spain by other parallel banks’ requirements. Additionally, we find that the existing voluntary buffers over capital requirements at the beginning of the pandemic have had significant effects on the financial markets, affecting the evolution of European bank stock prices, as well as the holdings of bank shares by investment funds. Lastly, we find no significant aggregate effect of voluntary capital buffers on the provision of financing to non-financial companies in Spain. However, we do identify negative effects in the supply of credit from banks with lower voluntary buffers to companies with which they had more recent relationships. Likewise, if the analysis is carried out exclusively on credit operations without public guarantees, we observe that those banks with lower voluntary capital buffers reduced credit more.

Suggested Citation

  • Luis Fernández Lafuerza & Matías Lamas & Javier Mencía & Irene Pablos & Raquel Vegas, 2023. "Analysis of the usability of capital buffers during the crisis precipitated by COVID-19," Occasional Papers 2223, Banco de España.
  • Handle: RePEc:bde:opaper:2223e
    DOI: https://doi.org/10.53479/29750
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    References listed on IDEAS

    as
    1. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
    2. Catherine Casanova & Bryan Hardy & Mert Onen, 2021. "Covid-19 policy measures to support bank lending," BIS Quarterly Review, Bank for International Settlements, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    capital usability; voluntary capital buffers; bank stock prices; provision of credit;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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